People often have a tendency to make a quick profit in the options trading industry. Without knowing the risk factors, novice traders open their trading account and try to make big bucks with the help of a high-leverage trading account. But the use of a high leverage trading account is never going to help you to become a professional trader. If you wish to succeed as a retail trader, you must learn to find the best possible trades and execute the trades with low risk. Even after doing that, you will be losing some trades. But still, you will manage to make a profit at the end of the month by avoiding the silly mistakes in the trading profession.
In this article, we are going to discuss some amazing ways by which you can avoid the most common mistakes in the trading profession. So, without any delay, let’s get into the details.
Trading the tops and bottoms
The novice traders love to take the trades at the tops and bottoms. They think it is the best way to make big money. But in reality, riding the newly formed trend is the most difficult task for the novice trader. Even the professional traders don’t love the concept they will be taking the trades at the tops and bottoms. Instead of doing that, you should be learning about the retracement factors of the market. For that, you may use the Fibonacci retracement tools.
Once you become good at using the Fibonacci retracement tools, you should be able to execute the trades with much more confidence. Most importantly, you won’t have to trade the tops and bottoms.
Trading without any plan
People often think that gut feeling is enough to secure big profits in the retail trading industry. But if this was so, no one would have lost money in the investment business. You have to create a well-balanced plan by using the demo trading account. Those who don’t know where to look for the professional demo account, get it from here. You may feel bored in the learning stage and ignore the most common rules of trading. But if you don’t take things seriously in the demo trading account, you are never going to learn things by heart.
Use the practice trading account properly and develop a professional trading edge. Once you start taking the trades with a robust plan, you will become much more confident with your actions.
Ignoring the risk management rule
No one should trade the market with high risk. To keep your capital safe, you should be always taking the trades with proper risk management. Most of the people blow up their trading account as they don’t have any idea about strong risk management technique. As an options trader, you should not be trading the market with more than 1% risk. Use the 1% risk management rule for six months.
Once you gain confidence with your trading system, you may increase the risk exposure to 2% of your account balance. While doing so, make sure you do not forget the fact, the outcomes are completely unpredictable in the trading industry.
Blindly following the professionals
The rookie traders love to trade with the professionals. They simply follow the technical and fundamental post and execute the trades with a big lot. But do you think the professional traders are always winning the trades? The obvious answer is NO. Everyone has to lose some money in this profession. You should not blindly follow professional traders even though they might have a strong record in offering financial service.
Use your intellect and reassess the condition of the market. If your analysis favors the post, you may take the trades. But do no trade with high risk or become overly confident that you will make money from that certain trade. Keep in mind, the option is all about probability and you must accept to deal with the losses.